Looking to expand your business and start hiring employees in Switzerland? Keep reading to find all your answers to compliantly hire employees in the country.
Contract for hiring employees in Switzerland
Employment contracts can typically be either written or orally agreed upon. A written description of the conditions of employment must be given to the employee.
Immigration Requirements for hiring employees in Switzerland
Non-EU/EFTA citizens must obtain a working permit to work in Switzerland, with the employer submitting required documents to the relevant work entity. The employee must obtain a work permit before entering Switzerland. The employee’s qualifications must also meet the requirements set by the Swiss government.
HR & Labor
Working hours: Full-time employees will work between 45 to 50 hours a week. Overtime is considered to be any hours after 50 hours a week and will be paid 125% of a regular salary. After 5.5 consecutive work hours, employees are entitled to a 15-minute break, a 30-minute break after working for more than 7 hours, and a one hour break after 9 hours of work.
Minimum working age: Although there is no official minimum working age, managerial positions are reserved for employees of 18 years of age and up.
Payroll
Salaries are disbursed at the end of the month on a monthly basis.
Social Security in Switzerland
Social Security Deductions in Switzerland
All social security taxes are the employer’s responsibility. The employer must withhold and remit the total deduction and deduct the employee’s share from his monthly salary. Resident individuals and individuals having a gainful activity in Switzerland as well as employers are required to contribute to the mandatory old age and disability insurance scheme. Individuals having a gainful activity in Switzerland and employers are also subject to mandatory unemployment insurance.
Contribution rates in Switzerland
Employee
Old age and disability: 5.125% of employee’s monthly gross salary.
Unemployment insurance: 1.10% of employee’s monthly gross salary.
Supplementary insurance 0.50% of employee’s monthly gross salary.
Total cost: 6.225%
Employer
Old age and disability: 5.125% of employee’s monthly gross salary.
Unemployment insurance: 1.10% of employee’s monthly gross salary.
Supplementary insurance 0.50% of employee’s monthly gross salary.
Total cost: 6.225%
Individual Income Tax & Benefits in Switzerland
Individual Income Tax
Swiss nationals or foreigners holding a C permit will normally pay provisional tax through three installments during the tax year (June 30, September 30, December 31). Final taxes will be paid once the annual return has been assessed.
Individual income tax rates for single taxpayers:
*Note:
- For taxable income above CHF 755,200 the overall tax rate will be 11.5%
Married taxpayers and single taxpayers with minor children:
*Note:
- For taxable income above CHF 895,900 the overall tax rate will be 11.50%
Personal Deductions
The following deductions can be claimed in the tax return as listed below:
• Alimony- Alimony and subsistence payments paid to minor children are tax-deductible for the payer and taxable for the recipient for federal tax purposes
• Charitable Contributions- A deduction for donations made to a qualifying Swiss-based charity organization
• Daycare expenses- Depending on the circumstances, actual childcare costs up to a capped amount may be claimed at the federal level.
• Mortgage deduction- A deduction for interest payments for mortgages and other loans may also be claimed on the tax return.
• Social security- Social security contributions of the employee, if not already deducted from the gross employment income, can be claimed as a deduction.
• Real estate cost- A deduction can be claimed on the tax return for maintenance costs for self-owned real estate
• Bank charges- A deduction can be claimed on the tax return for qualified bank charges
• Medical expenses- A deduction can be claimed on the tax return for un-reimbursed medical expenses
Personal Allowances
VAT/ GST Rates
Proceeds of sales and services conducted in Switzerland are subject to the general Swiss VAT rate of 7.7%. Goods for basic needs are subject to VAT at the rate of 2.5%, and services in connection with the provision of lodging are subject to VAT at the rate of 3.7%. A registered taxpayer generally is entitled to offset the amount of VAT charged by suppliers or paid on imports against the VAT payable.
Employee Termination Policies in Switzerland
The relationship between the employer and employee may be terminated by the employer or employee at any time with a certain period notice. If not otherwise specified in the employment contract, the contract can be terminated orally. For evidentiary purposes, however, one should send a notice letter by registered mail.
Termination is only effective once the letter of termination has been received by the employer. The letter must reach the employer on the last workday of the month at the latest.
The written notice must:
• Contain correct information about the employee and the employer (name, address).
• Specify the employment contract terminating
• Indicate the termination date (usually for the end of them).
• Be signed and dated.
If there is no written employment contract and no collective employment agreement, the period of notice is regulated by the Code of Obligations (CO). It comprises:
• 7 calendar days during the trial period (as of the end of any day)
• 1 month during the first year of service (as of the end of a given month)
• 2 months from the 2nd to the 9th year of service (as of the end of a given month)
• 3 months from the 10th year of service (as of the end of a given month)
Severance Pay
There is no general statutory severance pay or redundancy payment scheme in Switzerland. However, if a worker at least 50 years old and has 20 or more or more years of service with the same employer is entitled to a long service payment. As a minimum, this payment should amount to 2 months’ wages and shall not exceed 8 months. This may be reduced in part or canceled if the employee terminates his contract without proper justification if the employer summarily dismisses him for valid reasons or if the payment of this amount would result in difficulties for the employer.
Probationary Period in Switzerland
For an indefinite employment contract, the first month of employment is the probation period. However, the employer may choose to increase the probation period to three months or not to set one at all. The probation period is agreed upon in writing. It must be the same for both employer and employee. There is a seven-day period of notice during the probation period. Notice can be given on any day, but it must be received by the other party during the probation period. Notice can be given verbally unless written notice has been agreed on in the employment contract.
A company can terminate the employment contract during the probationary period even if the employee is unable to work due to sickness, accident, or legal obligations.
Rest & Holiday Leaves in Switzerland
Annual Leaves
All employees in Switzerland are entitled to at least four weeks’ holiday per year.
Public Holidays
New Year’s Day – January 1
Saint Berchtold’s Day – January 2
Epiphany – April 6
St Joseph’s Day – March 1
Good Friday – March 30
Easter Monday – April 2
Näfelser Fahrt – April 5
Labour Day – May 1
Ascension Day – May 10
Whit Monday – May 21
Corpus Christi – May 31
Independence of Jura – June 23
National Day – Aug 1
Assumption Day – Aug 15
Jeûne genevois – Sep 6
Day after the Federal Fast – Sep 17
St Mauritius – Sep 22
Brother Klaus Festival – Sep 25
All Saints’ Day – Nov 1
Immaculate Conception – Dec 8
Christmas Eve – Dec 24
Christmas Day – Dec 25
St Stephen’s Day – Dec 26
Restoration Day – Dec 31
New Year’s Eve – Dec 31
An effective and low-cost way to hire employees in Switzerland is to use a PEO (professional employer organization).
In this way, your company doesn’t need to set up a legal entity in the country and can start to have business in a faster way and with less risks.
For additional information, contact us to successfully expand your business and start hiring employees in Switzerland and other international destinations!
